SNC: Abiding faith or passing FAD? ( I )
Both Rear Admiral
Ndubuisi Kanu,
former Lagos Military Governor and NADECO Chief as well as Professor Julius Ihonvbere, Special Adviser to the President on Policy Monitoring have inadvertedly raised the noise-level for and against the so-called Sovereign National Conference respectively. Kanu’s articulation on SNC is contained in Soyinka’s 70th birthday lecture, he competently delivered at Muson Centre Onikan, Lagos. Articulated (official?) opposition is contained in Ihonvbere’s extensive interview in Vanguard of Friday July 23, 2004. The sheer antecedents of these dramatis personae and their capacity to shift ground without apology, has added a new dimension to the ‘debate’ over SNC.
Observers are now asking if opponents and proponents of SNC are truly expressing abiding faith or simply joining the band wagon of passing fad they are hitherto notorious for. According to political watchers, both Julius, my good friend and Kanu, my distant admirer, have more in common than their printed words tend to suggest. We dare not judge books by their covers! At different points in time, they both professed and acted contrary to what they currently say and do. Of course the only thing constant in life is change but people should know where those who talk to us come from.
Julius currently carries the banner of official opposition to SNC, but he accepts as much that until recent time, he “— sacrificed everything” he “had to call for a Sovereign National Conference under the military dictatorship because we believed — that the military dictatorship we had before was illegitimate, was insensitive and was repressive and corrupt”. Conversely Kanu derided and decried unitarism in his long-long essay for a restructured Republic. Yet without unitarism he currently decries with passion, Kanu would have remained anonymous, unknown. As an architect and beneficiary of a unitarist Supreme Military Council (SMC) and subsequent super-unitarist Armed Forces Ruling Council (AFRC), Kanu carries heavy feet of clay with respect to Federalism discourse. On account being an accomplice to the destruction of Federalism, his renewed advocacy for federalism must be with some regrets rather than the current exhibited arrogance. Those who ask for equity must certainly come with clean hands. That’s what the Bible says.
Of course as ordinary mortals, our hands can hardly be too clean, but let us be modest enough to accept our limitations and seek for forgiveness before we again carry on with business as usual. Again that is what all religions call us to do. Secondly, the proponents and opponents alike seem too fashionable for the principled and the most consistent to take too seriously. Kanu was a coup-maker, coup-beneficiary when it was fashionable! When military and militarism were discredited, he enlisted in ‘pro-democracy’ (not necessarily democracy!) and human rights activism. Today identity politics (or is it true-federalism?) dominates public discourse. True to antecedent, Admiral Kanu is in the fore-front with star-words!
With similar and even more remarkable robust passion, Julius also traversed thorny road of inconsistencies. When it was popular, he was on the barricade for revolution and popular sovereignty which sees people as source of all authority. Today from the roof-top of seat of power, a revolutionary is now a ‘reformer’ talking at (or is it against?) rather than talking with the people. Indeed for Julius a social scientist, sovereignty lies absolutely with the state in legalistic and legalistic sense alone and not relatively with the people. Observers note that if the founding founders of Nigeria lack abiding faith and opt for the latest fad as Kanus and Juliuses currently do, Nigeria would not have been independent. SNC is permanently hunted by the history of inconsistencies of its proponents and opponents alike.
Lastly, the bane of SNC discourse is its half-truth and sheer historical distortions underscoring lack of abiding faith of discussants. Kanu commendably celebrates 1960 Constitution for its sanctity of federalism, respect for autonomy of regions and their constitutions and decentralized economics. Fine! However, contrary to his conclusion of ‘return’ to `federation of ethnic nationalities’, 1960 Constitution was a product of all-inclusive democratic processes dating back to Herbert Macaulay’s political party, Nigerian (not Lagosian!) National (NOT ethnic!) Democratic Party in 1922 to subsequent Zik’s NNCC, Aminu Kano’s NEPU, Awo’s AG and Saudana’s NPC and most importantly trade unions of struggles of the Imoudus, Wahabi Goodlucks, Otegbeyes, Gogo Nzeribes, Jalingos, Raji Abdalas, Chief Kola Balogun, Mallam Bello Ijumus! The challenge of this robust diverse history of great nationalists, patriots and activists is that the match to true federation can only be done via the same all-inclusive democratic forces not exclusive categories like ethnic nationalities.
UNDP Development Report 2004 could not be more-timely. While the report urges development through diversity, it however cautions us on the danger of identity fundamentalism. “Identity politics that polarizes people and groups are creating fault lines between “us” and “them”, wrote UNDP. Kanu’s lecture albeit with good intention, (the road to hell is actually with good intention) reopens unhelpful “Us” and “Them” larger which again puts to test Kanu’s genuine abiding faith in the Nigerian Project! |
Soludo’s N25 billion plan to destroy Nigeria
The Central Bank
Governor, Charles
Soludo, recently announced that the minimum capital requirement for banks had been increased unbelievably by 1250 percent from N2billion to N25 billion. He stated that all banks are expected to attain this level of capitalization before the end of 2005 either through the injection of fresh capital or via mergers and acquisitions.
According to Soludo, his decision was driven by his desire to “copy the Jones” by encouraging mergers and acquisitions as an instrument for enhancing banking efficiency, size and the performance of their developmental roles. In simple English, Soludo wants banks to merge leaving just a few that would become more efficient (is this in terms of products and services or profits?), bigger and so that they can finance development projects like factories, roads, railways etc. Soludo based this decision, strangely, on the fact that mergers and acquisitions within the banking industry is now a global phenomenon and he cited the examples of U.S.A, Germany, Korea, Malaysia and Singapore.
The above-mentioned reasons prove glaringly that Soludo’s understanding of critical economic and banking issues is too limited. It seems that Soludo thinks “bigger means better”. It is common knowledge that the bigger an organization gets the more inefficient it becomes service or product wise. If bigger was better, First Bank PIc should be the most efficient bank in Nigeria. The truth is that mergers and acquisitions (“M&A) all over the world are driven by the desire of rational businessmen and their financial advisers to make more money. M&As reduce competition thus enabling bigger organizations (oligopolies) to provide lower quality services and products at greatly reduced overheads (after laying off workers) thus increasing profit. A serious minded Central Bank Governor is not supposed to increase or encourage inefficiency or unemployment. While there is nothing wrong with increasing profit (of a few surviving banks) by sacking workers in a society where unemployment is low, to do so in Nigeria during these bad times is economic suicide.
Also, the developmental role of a bank is determined by the level of risk in the society together with the prevailing interest rate and not by the size of the Bank. In all the countries mentioned by Soludo, doing business with government is the safest business activity in such countries. Government pays its suppliers and contractors within a set number of days (usually 7 days) after receipt of invoice. Also, these countries have clear and stable policies, which are not beclouded by acute corruption. Thus it is easy for their banks to play a developmental role. However, in Nigeria, the reverse is the shameful case. Government only pays its contractors when “family support” has exchanged hands or as a political favour. Even the Central Bank of Nigeria and the Nigerian National Petroleum Corporation, which are Nigeria’s largest government institutions, can not pay their suppliers within 90 days of receiving the invoice without generous “family support”. Furthermore, the same Soludo who wants banks to play a developmental role, as Economic Adviser, openly agreed with CBN that it was unsafe for Banks to participate in development projects, which expose them to state, and local government institutions.
Has he forgotten so soon? History records clearly that the development of great railway systems (initially owned by government) in both the United States and United Kingdom were financed by banks of all sizes via SYNDICATION, which is the safest way of financing development projects. Please note that this article would not bother to discuss the role interest rates play in financing national development as every economist (or CBN Governor) is expected to know it.
This article recognizes the fact that Charles Soludo has never worked in a bank or run a profit focused business in Nigeria, so in the interest of the nation, there is the need to educate him a little.
All banks perform only three basic functions; firstly, they collect money from people or organizations that have excess and lend it to those that have deficits. Secondly, they help to ensure that little amount of monies are pooled together for very large uses (projects). Thirdly, they ensure that monies saved for short periods can be used for long term uses. In other words, by mobilizing savings from all sources, banks are able to finance investment and developmental projects of all sizes thereby facilitating the economic development of that country. Accordingly, the importance of having an adequate number of financial institutions during the developmental stage of a nation cannot be overemphasized.
Prior to the mid 1980s, Nigeria had an oligopoly of banks, service was characterized by long queues and rude staff. Initiative was dead and innovation was non existent. Banks had no reason to improve their services; after all it was a captive sellers’ market. Membership of a strong secret cult was essential when seeking a bank loan for business purposes and corruption raged unabated. These were the darkest ages in Nigerian banking history. The subsequent liberalization of the industry gingered competition, which led to increased efficiency and innovation. The banking sector stopped being a burden and started offering value added services to the public. Forcing banks to merge or collapse in order to reduce the number of banks in the country would simply mean returning Nigeria to the terrible days of armchair banking.
It is true that the impact of Nigerian banks on the economy has been rather feeble over the years. This can be explained by the failure of government to encourage and foster the development of the four basic markets of banks in Nigeria. As complex as banking activities might seem, banks all over the world earn most of their income by investing in four basic market categories namely; corporate, mortgage, consumer and personal. The corporate banking market, which is usually the largest market for banks, is the only active market in Nigeria.
|
However, the activity in this market is still highly skewed towards the multinational companies. The treacherous economic environment fostered on Nigeria by the frequent and erratic changes in economic policy due to the unstable political situation together with the difficult operating environment makes it very risky to finance medium and small scale projects or businesses because these institutions can not weather the storms caused by adverse changes in government policy. Thus, banks are not able to get much income from the corporate banking market in Nigeria. To make matters worse, the high prevailing interest rates in the country makes it impossible to start a mortgage banking market in Nigeria. Mortgage banking, which is usually the second largest source of income for banks, is practically non-existent in Nigeria. As a result, Nigerian banks do not earn income from this market. Consumer banking involves making personal effects such as fridges and televisions available to people on credit terms. This is the third largest market for banks and it is followed closely by Personal Banking, which basically involves helping customers to meet pressing financial obligations when cash strapped. The high level of dishonesty and corruption backed by the absence of a reliable legal framework for recovering such loans in Nigeria also makes it unwise for any bank to plunge headlong into these two markets.
However, the situation is not totally bleak because within the corporate banking market in Nigeria, banks are able to tap into the highly lucrative businesses of dealing in foreign exchange and public sector funds. These are mainly “paper” transactions, with little, or no developmental value.
In other to strengthen the banking sector, the Central Bank Governor, together with the Debt Management Office, should first ensure that all outstanding financial obligations of the Federal Government, its ministries and parastatals to contractors and suppliers are converted into Special Development Bonds with the maturities spread equally over about five years. These bonds should be domiciled to banks were such contractors have outstanding loans. The bonds should be discounted internally by the banks towards the settlement of the loans. The bonds should be transferable, attractively priced and should count towards the computation of the bank’s liquidity ratio. This will immediately reduce the level of potential distress within the banking sector without increasing the liquidity in circulation.
In addition, the Central Bank should declare a Dividend Payout Holiday for all banks for a period of four years during which banks should be required to convert profit earned into additional shares. During this period, banks would also be required to increase their share capital in equal amounts of not less than N600 million per annum via retained revenues and additional equity. In this manner, CBN’s objective of strengthening banks would be achieved without eroding public confidence in the banking sector. Forcing Nigerian banks to increase their share capital to unrealistic levels will create an investment haven for drug trafficking, money laundering and 419 proceeds. This will not augur well for Nigeria’s image, which the .President has invested a lot of time and energy trying to repair.
In conclusion, the risk of destroying Nigeria’s economy as a result of the total collapse of the banking and financial sector is not in anyway comparable to the purported and unrealistic benefits of joining the global trend of mergers and acquisitions. Therefore, the Federal Government and the National Assembly need to urgently call Charles Soludo to order before he succeeds in destroying the Nigerian economy.
Kayode writes from Lagos
|
